FDI pledges down by 18.20 percent

While Nepal received the highest foreign direct investment (FDI) pledge of the year in Falgun, the overall FDI commitment is still down by 18.20 percent in FY 2022/23. The Department of Industry (DoI) has registered around 200 industries/firms that committed to investing Rs 28.129 billion in the nine months of the current fiscal year. FDI commitments worth Rs 34.388 billion were registered in the same period of FY 2021/22. According to the department, a total of 192 companies and firms have been registered in the first nine months of this fiscal. The department has also approved 53 technology transfer agreements.

The majority of industries approved by the department are small-scale industries. The DoI approved 166 small-scale industries, 22 medium-level, and four large-scale industries in the current fiscal year.

The service sector topped the chart in terms of FDI pledges. According to DoI, 45 percent of the registered industries are in the service sector category. The tourism sector is the second most preferred sector with 36 percent of industries registered in this category. Government officials point out the global economic downturn and the tightening of visa rules for foreign investors by the Nepal government for the decline in FDI pledges. "The FDI flow has decreased not only in Nepal but globally," said a DoI official. Nepal falls among the countries that receive the lowest FDI in the world. Despite many talks on attracting FDI in the country, the country has failed to attract foreign investors as expected. In November last year, the government lowered the minimum threshold for FDI to Rs 20 million from Rs 50 million to attract even the small foreign investors in the country. While the decision is expected to encourage FDI in the information and communication sector which does not need big investments in physical infrastructure, not many foreign investors have pledged to invest in this sector so far. FDI inflow declined this fiscal mainly due to a slowdown in investment commitment from China. The investors from the northern neighbor have been committing the largest amount of FDI in the last several years to Nepal. With China facing economic problems due to renewed Covid-19 crisis, and supply chain disruptions, investment pledges from the northern neighbor have also been affected. Tightening the visa rules for foreign investors, DoI in November last year, decided to recommend business visas for foreign investors only for three months at a time. As per the new rules, the department now recommends a business visa for three months by which time the investor has to submit a certificate of company registration. After the registration certificate has been received, DoI will recommend an extension of the business visa for another three months. Within this period, investors need to submit proof of having registered at the tax office and opened a bank account. However, DoI officials claim the new provision has helped in the screening of genuine foreign investors and that the results have been seen as reduced FDI pledges. Month wise FDI commitment

Month 2021/22 2022/23
Shrawan Rs 5.535 billion Rs 2.649 billion
Bhadra Rs 6.32 billion Rs 3.446 billion
Ashoj Rs 11.965 billion Rs 1.854 billion
Kartik Rs 0.98 billion Rs 3.65 billion
Mangsir Rs 5.151 billion Rs 0.808 billion
Poush Rs 0.612 billion Rs 4.852 billion
Magh Rs 0.539.5 billion Rs 1.39 billion
Falgun Rs 2.023 billion Rs 1.929 billion
Chaitra Rs 1.802 billion Rs 7.551 billion
Total Rs 34.388 billion Rs 28.129 billion